Question
Comparative financial statements for Wildhorse and Swifty Ltd. are shown below. WILDHORSE AND SWIFTY LTD. Income Statement Year Ended December 31 2021 2020 Net sales
Comparative financial statements for Wildhorse and Swifty Ltd. are shown below.
| WILDHORSE AND SWIFTY LTD. Income Statement Year Ended December 31 | ||||||
| 2021 | 2020 | |||||
| Net sales | $905,000 | $845,000 | ||||
| Cost of goods sold | 605,000 | 555,000 | ||||
| Gross profit | 300,000 | 290,000 | ||||
| Operating expenses | 159,000 | 155,000 | ||||
| Profit from operations | 141,000 | 135,000 | ||||
| Other revenues and expenses | ||||||
| Interest expense | 40,000 | 20,000 | ||||
| Profit before income tax | 101,000 | 115,000 | ||||
| Income tax expense | 37,000 | 20,000 | ||||
| Profit | $64,000 | $95,000 | ||||
| WILDHORSE AND SWIFTY LTD. Balance Sheet December 31 | ||||||
| Assets | 2021 | 2020 | 2019 | |||
| Cash | $83,000 | $80,000 | $10,000 | |||
| Accounts receivable | 153,000 | 149,000 | 103,000 | |||
| Inventories | 130,000 | 125,000 | 97,000 | |||
| Prepaid expenses | 25,000 | 22,000 | 113,000 | |||
| Land, buildings, and equipment | 390,000 | 305,000 | 300,000 | |||
| Total assets | $781,000 | $681,000 | $623,000 | |||
| Liabilities and Shareholders Equity | ||||||
| Liabilities | ||||||
| Notes payable | $110,000 | $100,000 | $100,000 | |||
| Accounts payable | 45,000 | 42,000 | 50,000 | |||
| Accrued liabilities | 32,000 | 45,000 | 30,000 | |||
| Bonds payable, due 2024 | 190,000 | 150,000 | 184,000 | |||
| Total liabilities | 377,000 | 337,000 | 364,000 | |||
| Shareholders equity | ||||||
| Common shares (20,000 issued) | 200,000 | 200,000 | 200,000 | |||
| Retained earnings | 204,000 | 144,000 | 59,000 | |||
| Total shareholders equity | 404,000 | 344,000 | 259,000 | |||
| Total liabilities and shareholders equity | $781,000 | $681,000 | $623,000 | |||
Additional information:
| 1. | Seventy-five percent of the sales were on account. | |
| 2. | The allowance for doubtful accounts was $4,000 in 2021, $5,000 in 2020, and $3,000 in 2019. | |
| 3. | In 2021 and 2020, dividends of $4,000 and $10,000, respectively, were paid to the common shareholders. | |
| 4. | Cash provided by operating activities was $103,500 in 2021 and $121,000 in 2020. | |
| 5. | Cash used by investing activities was $104,500 in 2021 and $34,000 in 2020. |
(a)
Calculate all possible liquidity, solvency, and profitability ratios for 2021 and 2020. (Round answers for Collection period, Days sales in inventory, Operating cycle and Free cash flow to 0 decimal places, e.g. 125. Round answer for Earnings per share to 2 decimal places, e.g. 12.50. Round all other answers to 1 decimal place, e.g. 12.5 or 12.5%. Enter negative amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
| 2021 | 2020 | ||||||||
| Liquidity Ratios | |||||||||
| 1. | Current ratio | : 1 | : 1 | ||||||
| 2. | Acid-test ratio | : 1 | : 1 | ||||||
| 3. | Receivables turnover | times | times | ||||||
| 4. | Collection period | days | days | ||||||
| 5. | Inventory turnover | times | times | ||||||
| 6. | Days sales in inventory | days | days | ||||||
| 7. | Operating cycle | days | days | ||||||
| Solvency Ratios | |||||||||
| 8. | Debt to total assets | % | % | ||||||
| 9. | Interest coverage | times | times | ||||||
| 10. | Free cash flow | $ | $ | ||||||
| Profitability Ratios | |||||||||
| 11. | Gross profit margin | % | % | ||||||
| 12. | Profit margin | % | % | ||||||
| 13. | Asset turnover | times | times | ||||||
| 14. | Return on assets | % | % | ||||||
| 15. | Return on equity | % | % | ||||||
| 16. | Earnings per share | $ | $ | ||||||
| 17. | Payout ratio | % | % | ||||||
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